ROOPA LAMBA,CHANDIGARH V. INCOME TAX OFFICER, WARD 1(3), CHANDIGARH, CHANDIGARH

ITA 537/CHANDI/2025

AI Insights

The case involves Roopa Lamba, the appellant, who contested the order of the Addl/JCIT(A)-2, Gurugram, which sustained the AO's assessment under Section 143(3) for the Assessment Year 2017-18. The AO had added an amount of Rs. 6,21,042 to the assessee's income, citing violations of Section 40A(3) due to certain cash payments exceeding Rs. 20,000. The assessee argued that the AO overstepped by examining cash payments when the scrutiny was limited to cash deposits during the demonetization period. The Tribunal agreed with the assessee, noting the absence of necessary approval for expanding the scope of scrutiny.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717595 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2017-2018
• Appeal Filed On: 14-04-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR
• Assessee Lawyers: VINEET KRISHAN
• Section: 143(3); 142(1); 40A(3)

Judgement Text

"आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ “एस.एम.सी” , च᭛डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH HEARING THROUGH: PHYSICAL MODE ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य BEFORE: SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं./ ITA No. 537 /Chd/2025 िनधाᭅरण वषᭅ / Assessment Year : 2017-18 Roopa Lamba H.No. 34, Sector 9, Chandigarh बनाम The ITO Ward 1(3) Chandigarh ˕ायी लेखा सं./PAN NO: AAMPL3166G अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Shri Vineet Krishan, Advocate राज᭭व कᳱ ओर से/ Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR सुनवाई कᳱ तारीख/Date of Hearing : 13/08/2025 उदघोषणा कᳱ तारीख/Date of Pronouncement : 14/08/2025 आदेश/Order PER VIKRAM SINGH YADAV, AM This is an appeal filed by the assessee against the order of the Ld. Addl/JCIT(A)-2, Gurugram dt. 17/03/2025 pertaining to Assessment Year 2017-18. 2. Briefly, the facts of the case are that the assessee filed her return of income declaring total income of Rs. 14,04,060/-. The case of the assessee was selected for limited scrutiny under CASS to examine cash deposits during the year under consideration. Thereafter, notices under section 143(2) and 142(1) were issued calling for the necessary information and documentation and thereafter, the AO completed the assessment under section 143(3) dt. 17/12/2019 wherein an amount of Rs. 6,21,042/- was brought to tax invoking the provisions of Section 40A(3) as the assessee has made certain cash payments in violation of the said provisions. Printed from counselvise.com 2 3. The assessee thereafter carried the matter in appeal before the Ld. Addl/JCIT(A)-2, Gurugram who has sustained the order and findings of the AO. Against the order of the Ld. Addl/JCIT(A)-2, Gurugram, the assessee is in appeal before us. 4. During the course of hearing, the Ld. AR submitted that the case of the assessee was selected for limited scrutiny to examine cash deposits during the demonetization period. It was submitted that the necessary details were submitted during the course of assessment proceedings and no adverse finding has been recorded by the AO. At the same time, the AO has invoked the provision of Section 40A(3) holding that the assessee has made certain cash payments exceeding Rs. 20,000/- which are in violation of Section 40A(3) of the Act. It was submitted that where the case of the assessee was selected for limited scrutiny to examine the cash deposits, the AO is required to restrict the examination to the issue basis which the case of the assessee was selected for scrutiny. However in the present case, the AO has went ahead and examine the cash payments incurred by the assessee. It was submitted that the said action on the part of the AO is clearly beyond his jurisdiction and more particularly, on account of the fact that the case of the assessee was selected for limited scrutiny and not complete scrutiny. 5. Further, it was submitted that the accounts of the assessee are duly audited and as far as the nature of payment are concerned, the same have been incurred wholly and exclusively for the purpose of business and the payments have been made either on account of business exigencies or on banking/public holidays and thus, satisfying the test of business expediency and falling under the exceptions so carved out. It was accordingly submitted that the AO has erred in invoking the provisions of Section 40A(3) of the Act. Printed from counselvise.com 3 6. The Ld. Sr DR was heard who couldn’t rebut the contention of the ld AR that the case of the assessee was selected for limited scrutiny to examine cash deposits. Further, she has relied upon the orders of the lower authorities. 7. I have heard the rival contentions and perused the material available on the record. In the instant case, it is noted that the case of the assessee was selected for limited scrutiny to examine cash deposits during the year under consideration, however, the additions which have been made are in relation to the cash payments/cash expenditure incurred by the assessee. I therefore find that the AO has clearly enlarged the scope of the assessment from examining the source of cash deposits to cash payments and as to whether the cash payments so made are in violation of section 40A(3) of the Act. Where during the course of assessment proceedings, the AO found that there are cash payments and potential violation of section 40A(3), the AO can no doubt carry out such examination provided such an expanded scope of assessment is undertaken by following the due process as laid down in the CBDT Instructions /Circulars issued from time to time and after seeking the necessary approval from the appropriate authority. However, there is nothing on record in terms of any steps being taken by the AO in terms of seeking the necessary approval and any approval granted by the appropriate authority whereby the scope of assessment has been expanded and enlarged from limited scrutiny to include examination of the cash payments so made by the assessee. I therefore find that in absence of necessary approval and order on record expanding the scope of the assessment, it is clearly a case where the AO has exceeded his jurisdiction in examining the cash payments which are clearly beyond the scope of limited scrutiny and therefore on this account itself, the additions so made by the AO deserves to be deleted as made without the requisite jurisdiction and the same is directed accordingly. Printed from counselvise.com 4 8. In view of the same, the other contentions so raised by the Ld. AR are left open and not adjudicated upon. 9. In the result, the appeal of the assessee is allowed. (Order pronounced in the open Court on 14/08/2025) Sd/- िवᮓम ᳲसह यादव (VIKRAM SINGH YADAV) लेखा सद᭭य / ACCOUNTANT MEMBER AG Date: 14/08/2025 आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. आयकर आयुᲦ (अपील)/ The CIT(A) 5. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅ फाईल/ Guard File Printed from counselvise.com "